I am 42 and can save Rs 20,000 a month, which I want to invest in mutual funds for the next 3-5 years. Guide me to select funds.
-Jay Prakash
The amount, Rs 20,000, you want to invest every month is a good sum that can build a sizeable corpus over the 3-5 years. We suggest you start with a balanced fund at this moment, like HDFC Prudence or Reliance Regular Savings for the next six months. Start with Rs 10,000 in balanced funds, and the rest in a liquid fund to develop a regular savings habit.
This will help you gain first-hand experience in investing in mutual funds. After six months, you can start working towards building your portfolio, by including a large-cap fund such as DSPBR Top 100 and a large-cap and mid-cap fund such as Birla Sun Life Frontline Equity Plan A. Do make sure you track your investment at least once a year and make any necessary changes.
I have invested in five Systematic Investment Plans (SIPs) over the past three years. Let me know if the investment is good and if I need to modify my holdings.
-Deepti Mittal
You have selected good funds. You have also demonstrated a regular investing temperament, especially through 2008, when the markets were going down. The result of such discipline is an unrealised gain of Rs 2 lakh on a combined investment of Rs 2.97 lakh.
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The 90 per cent equity exposure of the five funds you have has helped you make this significant gain. However, your portfolio is high on risk, with two mid-cap and small-cap funds, besides a fund that has a large-cap and mid-cap exposure. These are funds that go up faster when the markets go up and also fall when the markets dip.
There is scope for improvement, especially if you consider moving out of the infrastructure fund, which is thematic, and instead hold a large-cap fund which can buffer the shocks if the markets fall. You should consider DSPBR Top 100 or IDFC Imperial Equity Plan A. Do make it a habit to regularly track your investments and make any necessary change if a selected fund is not faring well any more.
I want to invest Rs 1 lakh for a short period of up to 12 months and I may require the amount any time after March 2011. Can you suggest options that would give more interest than bank fixed deposits?
-S S Roy
For the time period you have in mind; you should consider a liquid plan. These do not guarantee returns, but are tax-efficient in comparison to bank fixed deposits. More, these funds are liquid enough for you to exit when you wish and should serve your objective.
I want to invest in an equity-linked savings scheme (ELSS). I am unable to decide between Canara Robeco Equity Tax Saver and Fidelity Tax Advantage. They have different ratings and Canara Robeco looks impressive with its long-term good performance.
-Prashant S Khubchandani
At 22, you show great investing maturity. You are right with your observation that though Fidelity Tax Advantage is rated 5-star compared to Canara Robeco, which is rated 4 star, the long-term performance of Canara Robeco is better.
Considering Fidelity was launched in January 2006, it has fared well and, in a short time, demonstrated performance and is establishing the necessary track record to be a long-term player. However, you should also be aware that past performance is, at best, indicative and not a guarantee for future performance. You may pick any one.